The Federal Reserve Has New Rules for Stablecoins. Circle Could Be The Biggest Winner
Yahoo Finance ·
In mid-June, the Federal Reserve proposed new rules for stablecoins. The proposal calls for stablecoin issuers to verify customer identities before opening new accounts or redeeming tokens, effectively applying bank-style anti-money laundering standards to stablecoins. At first glance, this seems like bad news for Circle ( CRCL +6.82% ) , the issuer of the USD Coin ( USDC 0.01% ) stablecoin. However, those tighter restrictions could actually strengthen USD Coin and make Circle a more compelling investment. Circle promotes USD Coin as a tightly regulated, US-centric stablecoin. It's also firmly backed by U.S. dollars and Treasuries . Its main competitor, Tether ( USDT +0.01% ) , is issued by Hong Kong-based iFinex and backed by an opaque mix of cash, commercial paper, and other assets. While Tether dominates the overseas market, USD Coin leads the U.S. market. Circle's regulatory compliance makes USD Coin a trustworthy alternative to U.S. dollars for retail and institutional investors. But in many overseas markets, where investors consider stablecoins a hedge against inflation and currency devaluation, Tether's immunity from U.S. regulations -- along with its higher global liquidity -- makes it a better choice than USD Coin.
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